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As organizational theorist and management consultant Geoffrey Moore explains, businesses should be organized around four key zones of effort: the Performance Zone, the Productivity Zone, the Incubation Zone and the Transformation Zone. Only when the first three zones are functioning efficiently can enterprises entertain transformation.
When you think of all these transformational opportunities, it’s a very, very big ask, and the question is, “How can you set yourself up for success not only this year, but for the decade to come?” And to do that, I think you have to organize your business around four key zones of effort, and the fourth zone would be transformation. But it comes number four for a reason. The first zone is your Performance Zone.
It’s literally delivering on making what you make, selling what you sell, delivering on your quarterly commitments to your customers, your ecosystem, your investors, etcetera. The Performance Zone is the beginning of all business. It’s what people invest in. It’s what they expect from you.
In order to get that zone to work, you have to get your Productivity Zone humming as well. That’s all the work you do behind the scenes in order to make the Performance Zone look like heroes. So it’s all of your marketing, your legal, your HR, your customer service. Everything you would do behind the scenes to make the people who make what you sell and sell what you make be successful.
Those two – and most companies, I would say, do well here. But under digital pressure, you have to up your game and get very, very efficient, because you’re going to need to pull some resources out of these zones in order to be successful.
Now the third thing you got to do is have an Incubation Zone that puts good options on the table. These are people who have to get their fingers right into the middle of this digital future. You often put them a little bit aside from the organization: you let them move fast, you let them fail fast.
You buy some technology tuck-ins to help you get there even faster. And that zone is an investment basically in R&D and in the far future.
So once you have those three zones working properly, now you can entertain a transformation. And the transformation will be to take some technology out of that Incubation Zone, bring it into the Transformation Zone, probably take one of your existing businesses from the Performance Zone and marry them in the transformation zone. So you modernize your operating model in the Transformation Zone, you get through a very – and this is a very challenging period.
The CEO must lead here. They must get every – every executive on the team must give their unqualified support for this transformation. Ideally, everyone’s compensation depends on the transformation being successful. There is no more important thing to happen. Once you start a transformation, you must not fail to complete it. So one lesson there is don’t do it very often, but the other lesson is: when you do it, do it well. And that’s what the Transformation Zone – and by the way – zone is for.
Once the transformation is over, then you go back to saying, “Look, basically we’re a Performance Zone, a Productivity Zone, and an Incubation Zone. That is the stable state of our company for the next decade.” Transformation is just a way to get there.